Posted
by
timothyon Saturday February 23, 2013 @02:06AM
from the because-money-is-fungible dept.

hypnosec writes "Bitcoin is gaining popularity among mainstream sites lately and the latest to adopt the digital currency as a medium of donations and payments is the Internet Archive. Ready to accept donation in the form of Bitcoin, the Internet Archive announced that it wants to do so to pay some part of employees' salaries, if they choose to, in Bitcoin. The Archive, known for its storage of digital documents (especially the previous version of webpages), is looking to start part salary payments in Bitcoin by April 2013 if everything goes well."

Why would they want to? Is this how they've been told their salary can be made more competitive, and the alternative is to be underpaid? Is there implied coercion, as in "This is how we're going to try balancing the books. Who wants to participate?"

"uncertainty in the market" - it's exactly this reason why and these times when people turn to alternate currency, like gold, diamonds or Bitcoin.Any currency based on national debt (which is what we currently are using) seems to be problematic in the long term. Bitcoin has it's own issues but dependance on un-elected and unbalanced federal reserve isn't one of them, which ironically was founded to ensure the stability of the financial system.It's feature of being a "deflationary currency" is certainly a st

"uncertainty in the market" - it's exactly this reason why and these times when people turn to alternate currency, like gold, diamonds or Bitcoin.

You are here using a cheap propaganda technique to conflate gold and diamonds, which have intrinsic value and actual scarcity (well, of gold) with Bitcoins which are an imaginary currency based on artificial scarcity which is based on wasting electricity.

But they do have intrinsic value as they are useful for many manufacturing processes, and it's still expensive to make them as compared to digging them out of DeBeers' vaults, due (again) to the energy cost.

You seem to have succumbed to the reverse propaganda if you think that gold and diamonds are inherently more scarce and hence inherently more secure as a currency than bitcoin. The fact is that bitcoin are actually a lot harder to mine....

So would be purple unicorns, but I'm not hearing many suggestions that we adopt them as a medium of exchange.

Everyone who uses Bitcoin is a currency speculator. You can't buy everyday essentials with it, so you have to turn it back into money that your grocer accepts to do so. If you're keeping the bitcoins and not exchanging them for useful commodities (food, shelter, shiny toys, whatever), you're gambling that they will increase in value over time. The current situation with Bitcoin is that a large number of people are making the same gamble. This becomes a self-fulfilling prophecy, right up until the point when a large number of them decide to cash out. You might want to read up on the stock market in the late 1920s for a nice historical example of this happening...

On the other hand, if you're selling it immediately, then you're telling the market that you don't trust it as a long-term store of wealth and this contributes to the volatility. And if you don't think this is problematic, then consider what would happen if the value of your monthly, or even weekly, paycheque varied by 50% every week. Or even more. If you get paid on Friday, but on Thursday don't know whether you'll be paid $1000 or $500 (or $50), how financially secure will you be? How will it affect the rest of the economy if everyone has such variable incomes that they hoard some other store of value (e.g gold, land, or even US dollars) to hedge against a possible crash?

You could say the same about the US Dollar. You have "speculated" that the government won't default; that Bernanke won't devalue the dollar (even more) with another even bigger round of QE; that Walmart won't decide next week that they only take payment in gold or vintage Furbys or Yuan (yes, they can. No, it doesn't.)

You can't buy everyday essentials with it

Not the best hill to die on - You can buy just about anything [bitcoin.it] denominated in BTC today.

I spent a decade or so as a systems engineering consultant supporting a group of sales people. Sales people generally experience the world differently than engineers, and sales managers do lots of different things that they think will motivate them to sell lots of stuff, compensating them in often rapidly and randomly changing mixtures of salary, commission, bonuses, recognition programs, plaques, cheap trinkets, expensive trinkets, travel, whatever. Most of those years the people supporting them got simi

Why not? Right now you're looking at nearly a 35% gain if you were being paid now in corn future and selling them in 4 months. That's a hell of a turn around, that even beats the most aggressive and risky stock trading you can get the down and dirty in.

I don't think you understand how a futures contract works (or you're just wildly speculating). The futures price is not the price of the underlying asset -- it takes into account the appreciation of the underlying asset that is expected to occur over the life of the contract (and some adjustment for interest rates). So, the expected payout (ignoring interest rate effects) of the contract is $0.

Also (this is more a reply to the parent), futures contracts are "marked to market." You pay nothing to enter int

The value of US dollars can also vary quite considerably. The problem is being paid in a different currency to the one that you spend money in. It's a bigger problem when they're not linked in some way. I live in the UK, but do a reasonable amount of work for companies in the USA. Currently one US dollar is worth about 66p. Earlier this year it was 63p. A few years ago, it was 46p and it went up to about 60p over a year. Euros have varied from 78p to 89p over this year. The UK economy is closely lin

If people didn't invest in things, no one with an idea and without money would be able to build anything. We'd still probably all be farmers if that is the case. Of course, this concept of producing something is probably so fucking foreign to you, you whiny little crybaby fuck nut, that you make up stories about how people with money are holding you down, you pathetic little piece of shit cunt fuck dick head asshole dweeb fuck wad, you fucker, you.

No, he's not. Anyone with bitcoins knows that they need real money as well. So any bitloon would also have some other way to pay, or they aren't eating tonight.

Though does anyone else find it funny that this story is almost all ACs? What, all the people with an opinion on bitcoin are so cowardly they fear for their karma? Bitcoins are not at the point where anyone refusing to take them is missing out on anything.

By this logic there is no money in niche markets. Catering to people with bitcoins brings in money from the underground sorts. I don't sell anything that is illegal or can't be bought with USD although I'm pretty confident most of my customers who pay in bitcoins aren't exactly operating legitimate businesses. What they don't turn into USD doesn't attract attention. My bitcoin customers make a lot more custom requests for encrypted setups and things of that nature. However as long as I'm not involved, the r

It is not as good as USD because you can't use it to pay for anything except amongst a tiny group of people. Maybe it has value like any other barter item but so do collectible figurines, so good luck trying to pay your for your meal or mortgage with them.

Um no. You can exchange them for USD or just about any other currency of your choosing.

I've actually managed to pay ~25% of my expenses for the last two years with bitcoins, using them either directly or indirectly with a few smaller mining rigs.I use them directly to pay my hosting, vpn, investments in silver, and the rest is converted to USD to pay off my car. (so yeah, you can pay your meal or mortgage no problem)

The amount of places accepting them is growing fast, with over 2000 merchants using the bitpay processor alone right now.

I find them great to use directly when I can. Payment is almost instant. Don't have to worry about credit card data. You have direct evidence of transaction via the blockchain, so the one time I actually did have an issue with a transaction (cart failed), it was easy to show a valid transaction did indeed occur and was quickly resolved.

The problem with bitcoins is it feels like its a unstable market, just in agusust it was stuck around 10 but now its jumped up to 30. Might be a good investment to hold onto them but you take a chance of someone flooding the market and dropping the price dramatically. Imagine getting paid 500.00 worth as your paycheck but before you could get cash the price drops 50%.....i dont know if it could happen but bitcoin prices have dropped dramatically before. Plus, bitcoins are easily stol

I have a fair chunk of change for my discretionary spending, but it's almost all in Bitcoin. Sure, I pay the electric bill in USD (for now) and buy the groceries that way, but there are plenty of things that I won't buy unless I can buy them with Bitcoin. They are missing out on *some* sales.. Maybe the number isn't very significant, but for the ease of setting it up, I don't see why you wouldn't accept them.

Now, the reason I keep a lot of my money in Bitcoin is because it is a superior currency. No two ways about it. People sit there and bitch and moan about a 1% tax hike here, or there, but then immediately turn right around and are completely oblivious to a 50% tax that just took 1/2 of all their wealth.. They don''t notice when this happens because China buys up all the extra money that the CB keeps printing, but I'll wager a guess that they'll notice one day, when China comes back over here and purchases the west coast using our own money.

the more people that join the pyramid the more the "bitcoins" held by people like the above poster are worth

No. During the last year and a half, when the value of a bitcoin went from $32 (at which price point I bought a few) down to just above $2 (at which price point I didn't manage to buy a few) and then back up to $30 again the number of bitcoin users has increased exponentially.

There's actually no correlation whatsoever between the number of bitcoin users and the price of a bitcoin, which could be seen as falsifying your statement.

Remember folks, the more people that join the pyramid the more the "bitcoins" held by people like the above poster are worth. Think of that vested interest after reading about how wonderful these things are.

Remember folks, don't take financial advice from people who don't understand the term "pyramid scheme".

Which may or may not be anything remotely near what you put in in the first place, due to the high volatility and utter lack of any guarantee about convertibility. I guess a system run on "magic" would have these properties.

Unlike bank transfer, the whole process only take a few minutes

Credit card transactions take seconds.

it cost nothing

False.

is anonymous

This was repeatedly shown to be false.

just like cash in your wallet.

Except that Bitcoin cannot be used for secure offline payments, the way cash can. Oh, what,

Anyone with bitcoins knows that they need real money as well. So any bitloon would also have some other way to pay, or they aren't eating tonight.

Anyone with an oil field knows they need real money as well.
Anyone with cattle knows they need real money as well.
Anyone with gold knows they need real money as well.
Anyone with a silo full of corn knows they need real money as well.

Anyone with "real money" can't eat it.
Anyone with "real money" knows they need GBP (when they visit the UK).
Anyone with "real money" can't put it in their gas tank (though I suppose you could burn it for heat).

Use of one currency doesn't preclude the use of others. Bitcoin, whether the haters gonna hate or not, has become the preferred online currency for small-scale international transactions between people whose governments have silly archaic rules about sending "real" money into or out of the country (ie, all of them). Case in point, try sending $50 to a friend in a country that doesn't use your native currency. You can expect to nearly double that in the various fees you'll need to pay to do it legally and safely (by which I mean not stuffing an envelope with bills and praying you can trust the postal service in both countries).

"Real money" has exactly one required use - Paying your annual government extortion bill. For everything else, you can use whatever the hell both sides of the transaction agree upon. Corn, wine, oil, gold, frankincense, myrrh, BTC. All good, so long as both sides agree.

No, I want to be paid in Euros. Despite all the US jokes about the Euro about to collapse (OMFG, one of 17 countries has a debt ratio worse than the US, the entire continent is about to collapse), the Euro is in much better shape than the US, where not only is the fed on the brink of collapse, but most of the states, and most citizens of those states as well.

What I can't figure out is the "fiat" loons here love bitcoin, despite it being the most fiat currency ever conceived (aside from joke coinage, like

Possibly. Greek Euros have a serial number beginning with a Y. German Euros have a serial number beginning with an X.What I'm more concerned about is money in Euro bank accounts. If it is in a Greek bank account, even hsbc.gr which is actually registered with the Financial Services Authority in England under the same registration as my hsbc.co.uk account, it could get converted to Drachma.

There are not Greek Euros. The emergency plan for Greece leaving the Euro would be for every Euro to become (for example) 0.9 Euros and one Drachma. The total number of Euros in circulation would remain constant so the currency would (ignoring the lack of confidence that such a move would create) remain constant, but the Drachma would be effectively worthless, so everyone with money in Euros would lose approximately 10% of their savings. This probably wouldn't matter long-term, because the Greek economy

You must have some non-standard definition of fiat that I have not encountered before. In the wikipedia fiat money [wikipedia.org] article, we see a few definitions:

any money declared by a government to be legal tender.

state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.

money without intrinsic value.

Not being state backed would eliminate the first 2. You might personally question the "intrinsic" part of item 3 and you might not place value on it, some bitcoin mining machine performed a specific, well defined, item of work to create a bitcoin, giving it value within the community.

Merriam-webster gives:

a command or act of will that creates something without or as if without further effort

an authoritative or arbitrary order

Creation of bitcoins requires effort, maintaining the blockchain requires effort, and there is no authority that can arbitrarily create bitcoins without doing the work, so I don't see how any of those would apply.

You seem to be equating bitcoins with flooz [wikipedia.org]or beenz [wikipedia.org].

Yes, like hand-written IOUs are debts, and not currency. It seems the restriction on the first two is more related to the definition of "money" and not the "fiat" part. Fiat money is not backed by anything, and there is no guaranteed exchange of it to anything else. Oddly, your definition also states "The term fiat money has been defined variously as" as if the definition is not well fixed, and given that 2 of the three don't apply to gold-backed paper money, it seems most definitions don't work for the

Hopefully not too far off on a tangent, but we have to, by force, accept IOUs from an institution as currency.

That's completely incorrect. You are required, by law (force, as you like to say) to accept them for debts, but not as currency.

Full faith and credit of the US (or any other government, or per your previous example, corporation)? Smells like fiat to me.

Full faith of the bitcoin network?

There is no backing of it at all. A bitcoin is worth $0 by definition (or, the amount of electricity to calculate some number). So if "they" default, you've lost nothing. It's backed by nothing because it does not assert to have any value at all. That doesn't make it better or worse, just harder to define based on current words.

Dollars are currency, but I do not have to accept them for debts owed to me, assuming I structure the transaction that way from the beginning.

That's incorrect. You are allowed to force use of something else for a transaction, but are required, by law (force) to accept dollars if the transaction becomes a "debt".

If you sell me a car at the price of one goat per month for 2 years, and after one year, I crash the car (totalled) so I stop paying, how can you collect "your" goats? Either you initiate force against me to steal my goats, or you petition the government to force me to pay. IF you win, they will force me to pay in USD, the appropriate

Then address the case where a 3rd party is not brought in. How do you force the payment of goats? Theft? You can't enforce payment without initiating force of some kind, right?

It might also be an option for my suit to request "specific performance" of the contract, where my victory generates an order for you give me my goats on the previously agreed upon terms.

You'd be surprised how little that means in a dispute. They get a court order to present goats. If they don't abide by that, then they are forced to present the goats or money to that value, so in the end, you get paid USD, even if the contract explicitly states otherwise.

mid-14c., "compensation, payment," whether periodical, for regular service or for a specific service; from Anglo-French salarie (late 13c.), Old French salarie, from Latin salarium "salary, stipend," originally "soldier's allowance for the purchase of salt," noun use of neuter of adjective salarius "pertaining to salt," from sal (genitive salis) "salt" (see salt (n.)). Japanese sarariman "male salaried worker," literally "salary-man," is from

My other comment in this thread was "I'd quit if I were offered payment in corn futures as well". Anything you have to convert to spend is not very useful. At least with Euros, I'd be able to spend them directly at European websites, assuming I could get them deposited in a bank that would hold them as Euros.

We haven't had value "by decree" since price controls by those liberal Republicans in the early 1970s. Unless you live in China, where they fix the value of the RMB against the dollar, then the value of your currency, even fiat currency, is set by supply and demand on the open market. Bitcoin is fiat all the way down, and any argument against that is an argument against the US dollar being "fiat".

I would imagine that they pay him with tokens that the US government, promises to accept in exchange for taxes, and which oil-producing counties promise to accept in exchange for oil, guaranteeing a fairly large medium-to-long-term demand.

Not at all. Governments can get their taxes when people cash out to spend it on goods, services or they can then count it as income. I doubt the government will be accepting bitcoins as a legitimate way to pay your taxes either.

The same way everybody else does:- Employer says "I'm paying this much in cash/Bitcoins which has a value of $X USD."- Employer deducts taxes- Employee says "I just got paid this much in cash/Bitcoins which has a value of $X USD."- Employee files taxes.

Easy. If salaries are pegged to the Bitcoin equivalent of some US Dollar value, their taxable salary is that dollar value. If they literally have a stable salary denominated in Bitcoins that doesn't change when Bitcoin's value does, handle it the same way you'd handle the salary of someone who lives in the US and works remotely for a European company & gets paid in Euros.

Except that the exchange rate for Bitcoin may not be as well established as other currencies (I don't know that for sure, but it seems a reasonable guess), making it harder for your employer to defend the amount they paid during an audit.

If your salary is $1,250/week, payable in Bitcoins at the Mtgox exchange rate in effect at noon eastern on payday, or 95% of the highest rate between 9am & 5pm, whichever is higher, but you end up exchanging half of them for US Dollars 9 months later for 50% more, your reported income would be $1,250, and it's up to you to report the currency-speculation windfall to the IRS the way you would with any other currency. The fact that your employer did the speculation for you, with your permission, is irrele

If they are interested in experimenting with paying their employees in Bitcoin, they should use real dollars to buy Bitcoin. If they can't manage converting dollars into Bitcoin, how are their employees supposed to manage buying goods and services with it? What are your options for paying rent or property taxes with Bitcoin? Or looked at another way, if they are so convinced that Bitcoin is a valid currency, perhaps the experiment should be to accept Bitcoin as a donation and convert it to local currencies

You think the IRS doesn't already have procedures for employees getting paid in foreign currencies, or scrip, or in kind, or other carriers of value or anything else not US dollars? (That's a rhetorical question, because they do have such procedures.)

Production of Bitcoin should be taxable just like anything else that you make. If you have a business making clothes, your taxable income is the difference between what you sell the clothes for and your cost of making them. In the case of mining Bitcoin, your expenses are primarily computer equipment, electricity and physical space to contain the computer equipment.

Getting paid in Bitcoin is either the same as getting paid in a foreign currency or the same as barter - an exchange of value.

Your time is a cost in your business as well. It's usually paid for out of the business one way or another, whether by explicitly taking pay or by taking profits. It's just easier to talk about tangible stuff as expenses.

Since so many people ask about the tax issues around bitcoins thought I would share my experience with bitcoin profits and taxes in Canada.
Basically I purchase equipment to build a dedicated bitcoin machine, total cost around $900 mostly for graphics cards. In all I made about 600 bitcoins over three months and was on average able to cash them out for about $10 per bitcoin shortly after the crash of the price from $30 on the way down to $5. As a Canadian during the $30 spike, the ability to liquidate fast enough to take advantage of those prices while limited due to the risk I was willing to take about putting my bitcoin in different online exchange accounts.
In all I gross about $6k and come tax time spoke with my accountant and was able to claim it as business income. That means I was able to write off a portion of space in my house (limited by local by-laws), mortgage payments, power, utilities, etc... as well as write off portions of the $900 PC purchase each year as capital investment. After all was said in done on the $6k I took in, I ended up having to pay back $1.5k for a net of $4.5k plus a still have a great new PC.
For the three months I toyed with Bitcoin it was certainly worth it.

I see a lot of posts saying that "bitcoin transactions aren't taxed" and "no payroll taxes if you're paid in bitcoin."

Huh?

If I'm working in the US but my employer pays me in GBP, they should still be sending an appropriate amount for FICA, Medicare, and withholding to Washington, and I should be declaring the income on my 1040. A different currency doesn't make it tax free.

Does Bitcoin make it easier to evade taxes? Sure, maybe it does. Doesn't make it legal.

I just happen to be sitting waiting for a bitcoin talk to start at Liberty Forum and I just walked past a bitcoin ATM and my next stop is a company that is making them usable for purchase at 7-11 and Walgreens. Interesting times.

I have been requested by the Nigerian National Steal Company to contact you for assistance in resolving a matter. The Nigerian National Steal Company has recently concluded a large number of contracts for scrap steal exploration in the sub-Sahara region. The contracts have immediately produced moneys equaling BTC40,000,000. The Nigerian National Steal Company is desirous of scrap steal exploration in other parts of the world, however, because of certain regulations of the Nigerian Government, it

Ultimately, the *only* thing backing a currency is the confidence of those who use it.

Nonsense. The value of the USD is determined by supply and demand, like everything else. Demand does not come from "confidence," it comes from law: lax law, debt law, tort law, etc. When the government tells you, "Pay your taxes, or you go to prison," you suddenly have a need for the currency accepted for tax payments -- and in the US, that would be USD. Likewise with loans, damages awarded by courts, etc. The only "confidence" to speak of is confidence in the government's ability to enforce its law